When a group of business owners get together, it’s called a Board meeting. The goal of a Board is to help you think through the risks and possible 2nd-order consequences, thereby minimizing the likelihood of you doing something stupid.

Every great Board of Directors knows that

The single most toxic poison in business is excessive emotion. Emotions and intellect work inversely. As I said at the start of The Road Less Stupid, when emotion goes up, intellect goes down.

Every business is just one bad decision away from a financial disaster. Look no farther than Lehman Brothers: 130 years old; $1.4 trillion in assets; gone in 90 days because of one stupid decision . . . and numerous unexamined assumptions.

Over the long term, the amount of net worth on the balance sheet or money in the bank is determined more by the number and size of the losses incurred and less by the number or size of the winners hit. There is always uncertainty and, therefore, risks. In business, an addiction to certainty is rarely your friend. Assessing and controlling risk (which is paramount to financial success) is only possible by thinking through key risk related questions:What are the risks we are facing? Really! What is the probability of these risks occurring? How costly are these risks should they occur? How can we control or mitigate the probability or the cost?Where have we substituted optimism for risk assessment in our business and thinking?What assumptions have I made about our future that might not be true, and if they ultimately proved to be untrue, what contingency plans do I need to develop today to ensure survival if I am wrong?Where have I let my emotions and need for more interfere with my judgment?

What we achieved in the past is a poor predictor of what we will achieve in the future. I am certain Netscape, Atari, AltaVista, Polaroid, and JC Penny would agree with me that the rules and the environment are always changing. People who are impressed with their prior success or who crave fame and applause rarely make the changes required to be relevant in the future. Leadership requires humility. No humility, no learning.

A great Board will not agree with you so that you will feel good, nor are they willing to become one of your groupie fans sitting in the stands enthusiastically cheering you on in the misguided belief that if they would just cheer louder, you will win the game.

A wall of accolades for past success and pictures with famous people are wonderful for the ego (I call this the “I love me . . . look how great I am” wall), but they do nothing to put money into your pocket or drive sustainable business success. Use a Thinking Time session or two in deep thought about the future and where you are being lulled to sleep by past success:

Where have I extrapolated past performance as a predictor for future results? 

Where have we confused applause for past performance with future financial success?

Where have we allowed our past success to lull us into believing we are bulletproof?

What business decisions do we need to make to ensure our future viability?

Given the current marketplace landscape, which part of our business needs to be reinvented?

Where are our results diminishing even though we are still doing what we used to? In light of this assessment, what needs to change?

Courtesy: The Road Less Stupid- Advice from the Chairman of the Board -- Keith J. Cunningham